What happened

Shares of Twilio (NYSE:TWLO) have jumped today, up by 7% as of 1:10 p.m. EDT, after the company announced that it is acquiring customer-data platform Segment for $3.2 billion. The deal had been rumored  in recent days.

So what

The all-stock deal will help the communications technology company better address use cases across customer service, marketing, and sales. The company says that the acquisition will strengthen its ability to help business customers derive insights from data, giving enterprise organizations a "unified view" to understand their customers.

Twilio logo.

Image source: Twilio.

"Data silos destroy great customer experiences," Twilio CEO Jeff Lawson said in a statement. "Segment lets developers and companies break down those silos and build a complete picture of their customer."

Now what

In an investor presentation outlining the deal's benefits, Twilio said that unifying customer data helps boost engagement, which in turn leads to more communication. Twilio can expand Segment's reach, and the company can pursue additional cross-selling opportunities. Twilio notes that Segment was the top customer-data platform with 9% market share in 2019, citing data from the International Data Corporation (IDC).

The acquisition expands Twilio's total addressable market (TAM) by $17 billion, bringing the combined company's TAM to $79 billion. Segment has adjusted gross margins of around 75%, and Twilio is paying a valuation multiple similar to its 2019 acquisition of SendGrid. Segment will be Twilio's largest acquisition to date, and the deal is expected to close in the fourth quarter.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.